Can You Buy as Much Life Insurance as You Want?

Just the Right Amount.

It is very important to have enough life insurance or mortgage protection insurance to pay off your bills and replace your income to support your family, but how much do you actually need?

Getting Enough

In general, at a bare minimum, you want to get at least 10 times your income, but for most people this is not enough. As you calculate your needs, take into consideration how much income your family will need when you are gone, this includes housing, medical bills, groceries, utilities, home repairs, clothing, possible childcare for a newly single parent and more.

Do you have kids? Then there might be school sports, yearbooks, picture packages and prom dresses. It’s shocking how fast these expenses add up! And then there is college to consider after that.

Can You Buy as Much Life Insurance as You Want?

The short answer: No, you can’t.

Common Limitations

Even though you have a need for insurance due to all the reasons above, you still cannot buy an unlimited amount of insurance.

The insurance company takes many things into consideration when deciding how much life insurance they will sell you. They look at your employment, hobbies, driving record, health, income, credit report and more.

Employment and Hobbies

If you have poor health or a dangerous profession, you will not qualify for as much insurance as if you were very healthy or had a desk job.

Some prescription medications that might affect the amount of life insurance you can buy are: medications for diabetes, anxiety, depression, heart health, dementia, HIV, ADHD and various mental disorders.

Keep in mind, you need to give the insurance company permission to pull your medical records and prescription history. They will not see this information if you don’t give them permission. However, for many insurance policies, you are required to release this information if you want to qualify.

Financial History and Credit Report

Have you had a recent bankruptcy, foreclosure or a low credit score? Then you may be limited in the amount of life insurance you can buy. The insurance company will pull your credit report through Equifax, Experian and TransUnion.

By doing this, they will see if you have a history of paying your bills on time, the amount of debt you have, and the number of new credit cards and loans you have applied for.

In addition to these reports, they will want to know your income, assets and other financial data.

It’s important to the insurance companies that you are able to afford to make your monthly premium payments.

Some people lie about their income, saying they make more than they actually do so they can qualify for more life insurance. Don’t do this. You will be caught and may be completely denied future life insurance policies.

Travel

When you apply, the insurance company might ask about your upcoming travel plans.

Some items that might limit the amount of life insurance you can buy are: planned travel to a war torn country or a country known for having deadly or highly contactable illnesses.

Some of the countries of concern due to war, civil unrest, armed conflict and terrorism in 2018 are: Syria, Afghanistan, Iraq, Somalia, Sudan, Central African Republic, Democratic Republic of Congo and Pakistan. To check the most recent travel advisories, check the U.S. Department of State page.

Regarding disease, countries that suffer from war usually suffer from disease outbreaks as well, so these two lists often overlap. For example, as of January 2018, the Democratic Republic of Congo is suffering from polio, measles, yellow fever and plague. To check the countries that have travel advisories, visit the CDC Travel Health Notice page.

Note: If you do need to travel to a high-risk country, there is special life insurance to cover you. When you apply for a general life insurance policy, tell them your travel plans, and they may still allow you to buy life insurance with those countries and that travel excluded from your coverage. Then you can get separate war and terrorism life insurance through a company that specializes in that sort of coverage.

Criminal Record

Life insurance companies often see people with a criminal record as living a ‘risky’ lifestyle – a lifestyle that might include drugs, fights, jail time and more. And these risks might lead to your early death.

If you are currently in jail, on probation or awaiting trial, you cannot purchase life insurance. Once you are out of jail and have completed probation, you might be able to get insurance, but it may be very expensive. The less severe the crime was and the more time has passed, the more likely you will be able to buy life insurance.

Whatever you do, do not lie on your application and try to hide your criminal record. The insurance company will 100% find out, and your lie is guaranteed to get your application declined automatically.

Multiple Insurance Policies

Some people wonder if buying life insurance from multiple companies will get around the limitations listed above.

You CAN purchase policies from more than one company, and getting more than one policy from the same or different insurance companies might be cheaper than having a single policy for the larger amount.

This is a good option if you plan to get more than one policy for less than the actual amount of insurance you need. For example, both policies add up to how much you need. This means you are splitting the coverage between two or more companies. Doing this can increase your options for types of coverage and lower your monthly payments.

However, if your goal is to get much more insurance than what one company wants to give you, then it gets more complicated. If you have a policy with a company for the maximum coverage they will give you, a different insurance company might worry about your ability to pay for a second policy. Companies do share information and will know if you have more than one policy.

Companies Do Share Information!

Most insurance companies today are members of the Medical Information Bureau, the MIB. This group is a source of information about all the people who have applied for life insurance.

Although different insurance companies do not talk to each other directly, they will use their MIB membership to learn more about you.

Consulting the MIB protects the insurance companies from fraud as well since another reason people over-insure is to ‘scam’ the insurance companies out of more money than they would normally qualify for.

Why Over-insure (buy more than you need)?

Some people over-estimate how much money their family will need if they die. They may decide it is better to have too much life insurance than risk not having enough. Others consider a large policy as a way to give their loved ones something they couldn’t give them when they were alive. A good insurance company will work with you to write a policy to meet your exact needs.

If your needs change, and you need more insurance to cover debts or to provide for your family, this isn’t over-insuring.

If you can justify the need for more coverage and justify your ability to pay for it, then you can probably get the increased amount of coverage you need.

If you do want to get more insurance than you actually need, keep in mind that being over-insured could end up putting more of a financial burden on you and your loved ones while you are alive instead of giving you peace of mind that they will be taken care of after you are gone.

Asurea Can Help

With our independent agents and access to over 40 insurance companies, we can help you find the right policy. If there is coverage available for you, we will find it. Contact us to see how we can help you protect your family.

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This information is provided for general consumer educational purposes and is not intended to provide legal, tax or investment advice.

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After obtaining her Master’s Degree from CSU, Sacramento, Leslie joined Asurea as the Marketing Communications Coordinator in February 2015. Since then, she has been working closely with insurance professionals to educate the public on the importance of life insurance and protect the public from common scams to be aware of, insurance and otherwise.